The Economics of Open Source Software Development

Edited By

Jürgen Bitzer, Free University Berlin, Germany

Philipp Schröder, Dept. of Economics, Aarhus School of Business, Denmark

Open Source Software (OSS) development appears to present a stark contrast to traditional production and innovation methods and an unlikely contestant in the marketplace. Some of the most striking features are that OSS development is based on contributions of volunteer programmers, that these programmers only associated with each other through informal communities, that the resulting software products are made available for free, and that this unconventional development method is able to produce software of high complexity and extraordinary quality. Obviously, the emergence of software has fundamentally changed the software business. The simple facts that production is carried out by voluntary private programmers and that the marketable outcomes are supplied to consumers for free, have resulted in far-reaching effects on market structures, business models, and innovation processes in the software industry. While incumbents had to adapt their strategies to this newly emerging competition, OSS-based firms had to develop viable business models enabling them to generate profits. These fundamental changes in the software industry have subsequently attracted the interest of analysts, business people and research in economics and management science.